ING Groep N.V. (ING) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company showed strong financial performance with record high revenue and net profit, a robust increase in fee growth, and a solid capital generation plan. Shareholder returns are enhanced with additional distributions. While some uncertainties exist, like the unclear long-term liability margin and AI investments, the positive elements such as optimistic guidance, strong fee growth, and a solid shareholder return plan outweigh these concerns. The Q&A insights reflect confidence in continued growth, supporting a positive sentiment.
Key Financial Performance
Mobile primary customers Added more than 350,000 during the quarter, bringing total growth for the year to over 1 million. This aligns with the ambitious target set at the Capital Markets Day.
Loan growth Absolute growth doubled versus the prior year, resulting in an 8.3% increase since the start of the year. Retail Banking delivered EUR 10.1 billion in net core lending growth, driven mainly by residential mortgages. Wholesale Banking added EUR 10.3 billion, supported by strong demand in lending and working capital solutions.
Core deposits Rose by EUR 38.1 billion for the full year or 5.5%. In the fourth quarter, Retail Banking contributed EUR 11.3 billion, benefiting from targeted campaigns and normal seasonal inflows, while Wholesale Banking recorded a small net outflow due to lower short-term balances in cash pooling activities.
Fee income Grew by 15% for the full year, supported by continued customer growth and increased cross-sell. The fourth quarter included a one-off benefit of EUR 66 million.
Return on equity (ROE) Achieved 13.2% for 2025, well above the guidance provided at the start of the year.
Sustainability volume mobilized Reached EUR 166 billion for the year, representing a 28% increase versus 2024.
Commercial NII Remained very strong at EUR 15.3 billion, supported by significant increases in customer balances on both the lending and liabilities side. Volume growth largely offset expected margin normalization.
Total income growth Reached a record level for the third consecutive year, fueled by strong NII and fee performance.
Net profit Delivered more than EUR 6.3 billion in net profit, contributing almost 2 percentage points to the CET1 ratio. 50% of this was distributed as a regular cash dividend.
Capital generation Announced additional distributions totaling EUR 3.6 billion, which helped bring the CET1 ratio closer to the target level.
Customer balances Net core lending increased by EUR 20 billion in the fourth quarter. Retail Banking contributed EUR 10.1 billion, driven by mortgage growth, while Wholesale Banking added EUR 10.3 billion, reflecting strong performance in lending and working capital solutions.
Fee growth Increased 22% year-on-year. Excluding a EUR 66 million one-off in Germany, fees grew by 17%, driven by customer growth, higher insurance fees, and increased daily banking fees.
Risk costs Total risk costs were EUR 365 million in the quarter, equivalent to 20 basis points of average customer lending. This is in line with the through-the-cycle average.
Core Tier 1 ratio Declined compared to the last quarter due to a EUR 1.6 billion distribution, partly offset by the inclusion of quarterly net profit. Risk-weighted assets increased by EUR 4.5 billion.
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Operating Highlights
Mobile primary customers: Added more than 350,000 in Q4, totaling over 1 million for the year.
Investment products: Strong performance with 9% growth in customers, 16% growth in assets under management, and 22% more trades.
New product offerings: Introduced subscription model for retail clients in Romania and new products for Gen Z, including an investment fund focused on financial awareness.
Geographic expansion: Launched business banking propositions in Italy and Germany, seeing strong customer growth.
Retail banking growth: Targeted campaigns in the Netherlands, Spain, and Poland led to significant deposit growth.
Operational efficiency: Increased share of customer journeys handled without manual intervention and introduced chatbots in several retail markets, resulting in annual savings.
Customer experience: Maintained #1 NPS position in 5 out of 10 retail markets and achieved an NPS of 77 in Wholesale Banking.
Income diversification: Focused on growing and diversifying income through customer growth and cross-sell, including expanding investment product offerings.
Sustainability: Mobilized EUR 166 billion in sustainability volume, a 28% increase from 2024.
Capital allocation: Increased capital allocated to retail banking to 54% and optimized capital usage in Wholesale Banking.
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Risk or Challenges
Regulatory Costs: The annual Dutch bank tax, which is fully recognized in the fourth quarter, adds a significant regulatory cost burden. This could impact profitability and operational flexibility.
Inflationary Pressure: Inflationary pressures are expected to predominantly impact staff expenses, leading to increased operational costs.
Risk Costs: Total risk costs were EUR 365 million in the quarter, driven by individual Stage 3 provisioning for new and existing funds in the wholesale bank. This indicates potential credit risk challenges.
Operational Risk-Weighted Assets: Operational risk-weighted assets increased by EUR 2.2 billion, which could indicate higher operational risks or inefficiencies.
Market Risk-Weighted Assets: Market risk-weighted assets increased by EUR 0.5 billion, reflecting potential vulnerabilities to market fluctuations.
Foreign Currency Hedging: Treasury income was impacted by lower results from foreign currency hedging, which could affect financial performance in volatile currency markets.
Wholesale Banking Fees: Fee income in wholesale banking decreased sequentially, which could indicate challenges in maintaining fee-based revenue streams.
Stage 3 Loan Provisions: The increase in Stage 3 provisions for wholesale banking loans suggests potential credit quality issues in the loan portfolio.
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Guidance & Outlook
2026 Total Income: Expected to reach around EUR 24 billion, supported by continued volume growth and an anticipated 5% to 10% increase in fee income.
2026 Operating Expenses: Projected to be in the range of EUR 12.6 billion to EUR 12.8 billion, excluding incidentals.
2026 Return on Equity (ROE): Expected to be 14%.
2026 Return on Tangible Equity (ROTE): Expected to be higher than 14%.
2027 Total Income: Expected to exceed EUR 25 billion, at the upper end of the previous target range.
2027 Fee Income: Expected to exceed EUR 5 billion.
2027 Operating Expenses: Projected to be around EUR 13 billion, excluding incidentals.
2027 Return on Equity (ROE): Expected to be 15%.
2027 Return on Tangible Equity (ROTE): Expected to be more than 15%.
Customer Balance Growth: Assumed to grow around 5% per year, above previous guidance.
Fee Income Growth: Expected to grow by 5% to 10% in 2026, building on strong 2025 performance.
Capital Allocation: Focus on maintaining a CET1 capital ratio target of around 13%, with a 50% payout policy and additional capital allocated to retail banking.
Operational Efficiency: Plans to enhance efficiency through scaling processes, people, and technology, including further utilization of Gen AI.
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Shareholder Return Plan
Regular Cash Dividend: 50% of the EUR 6.3 billion net profit for 2025 is distributed as a regular cash dividend, offering shareholders an attractive and predictable cash yield.
Additional Cash Distribution: EUR 500 million in cash was paid out earlier in January 2026, contributing to a total cash distribution of EUR 3.3 billion for the year.
Share Buyback Program: A share buyback program announced in November 2025 is currently underway and is expected to be completed by April 2026. This program is part of the total shareholder distributions amounting to EUR 3.6 billion.
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Key Q&A
Q:What assumptions are being made for the EUR 25 billion total income guidance?
A:The assumptions include a 5% balance growth, which is considered conservative based on Q4 performance. The December curve was used for projections, and liability margin is forecasted to be on the lower end of 100 to 110 basis points.
Q:What is the outlook for Wholesale Banking risk-weighted assets (RWA) growth?
A:Wholesale Banking has seen good lending growth in the second half of the year, with well-filled pipelines. The company plans to continue SRTs, expecting a positive impact on CET1 of 15 to 20 basis points in 2026 and 2027.
Q:What is the company's stance on loans versus deposit growth?
A:Loan growth was about 8% in 2025, while deposit growth was about 6%. The company aims to balance the balance sheet over the long term, with similar growth in loans and deposits. Significant loan growth is noted in mortgages.
Q:What is the cost outlook beyond 2026?
A:The company expects positive jaws to continue into 2027, with inflation impact moderating. Investments in client acquisition, financial market infrastructure, and payment capabilities will continue. Cost reduction ambition has been upgraded from 2% to 3%.
Q:What is the company's strategy on M&A?
A:The company is open to acquisitions that accelerate growth, add local scale, and are accretive for shareholders. Recent acquisitions include a financial stake in private banking and an asset manager in Poland. The company is also exploring opportunities in Romania, Spain, and Italy.
Q:What is the outlook for liability margins in 2027?
A:The company does not provide specific guidance for 2027 liability margins but expects to operate at the lower end of 100 to 110 basis points in 2026. The accretion in replication is expected to remain strong.
Q:What are the company's plans for AI and technology investments?
A:The company is leveraging AI and GenAI in areas like contact centers, IT coding, lending, personalized marketing, and KYC. Benefits include improved customer satisfaction, operational leverage, and process optimization. Investments in AI and technology will continue to grow.
Q:What is the company's approach to deposit campaigns?
A:The company regularly conducts deposit campaigns, which have been effective in attracting new money and customers. Approximately two-thirds of the money from campaigns tends to stick with ING.
Q:What is the company's lending volume growth expectation for 2026?
A:The company expects 5% lending volume growth, driven by strong mortgage growth and improvements in business banking processes. Wholesale Banking growth is expected to be more variable.
Q:What is the company's focus in Wholesale Banking?
A:The focus is on increasing revenues and returns over RWA, diversifying income through transaction services and financial markets, and optimizing capital through SRTs.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer on the liability margin outlook for 2027, stating only that they expect to operate at the lower end of 100 to 110 basis points in 2026. They also did not provide specific details on the long-term impact of AI and technology investments or the exact contribution of the long end of the replication portfolio to future income.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Banking outflow
CET
EUR banking
EUR cash
EUR increase
Executive
Germany
ING
Markets
NII EUR
NPS
PCM
Slide NII
Slide development
Stage
Tanate insight
Wholesale Banking
campaign inflow
capital banking
cash dividend
client
currency
customer balance
deposit
efficiency customer
fee income
fund
incidental EUR
income EUR
income cost
income outlook
inflow Wholesale
investment efficiency
lending
liability
people technology
process people
ratio
return equity
risk asset
support
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ING Groep N.V. (ING) Q4 2025 Earnings Call Transcript
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The earnings call highlights strong financial performance with increased fee income, a significant lending book, and growth in deposits. The company shows robust product development and market strategy, notably in digital and sustainable initiatives. While risk costs and competition are concerns, the positive guidance and shareholder returns, including a share buyback and dividend, suggest a favorable outlook. The Q&A session indicates management's proactive approach to emerging risks and opportunities, further supporting a positive sentiment.
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The earnings call summary and Q&A session indicate positive sentiment. The company has raised fee growth and total income expectations, maintained cost management, and announced substantial shareholder returns. Despite not including international expansion in 2026 numbers, confidence in growth and AI capabilities is high. Strong appliance margins and expected software margin improvements further support positive sentiment. The lack of specific guidance on certain revenue contributions is a minor concern but doesn't overshadow the overall optimistic outlook.
ING Report
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